By TIOL News Service

AHMEDABAD, JUNE 11, 2013: SUPPLY of goods from and to SEZ is always a subject matter of different interpretations leading to various disputes. When the revenue demanded export duty on supplies made to SEZ by treating them as “exports”, the same was set aside by the High Court of Gujarat in 2009-TIOL-674-HC-AHM-CUS and upheld by the Supreme Court in 2010-TIOL-50-SC-SEZ, by holding that the definition of export under SEZ cannot be imported into Customs Act for imposing export duty.

Now, the revenue seeks to deny the refund of SAD ( Additional duty of Customs) paid by an SEZ Unit on supplies made in DTA, on the ground that the same cannot be treated as “ Imports” for the purpose of extending the benefit of refund under provisions of Notification No 102/2007 Cus dated 14.09.2007.

The appellants filed various bills of entry for supply of goods into domestic tariff area from Special Economic Zone (SEZ), on which appropriate customs duties including additional duty of customs leviable thereof under Sub-section 5 of Section 3 of the Customs Tariff Act, 1975 (SAD) was paid at the time of clearance. Subsequently appellants have claimed refund of SAD paid in terms of Notification No.102/2007-CUS dated 14/09/2007 which inter-alia, provided for refund of SAD subject to conditions laid down there-under. The refund claims were sanctioned by the Adjudicating Authority. However, the Commissioner (Appeals) allowed the appeal of the department and reversed the Order-in-Original. Aggrieved by the order of Commissioner (Appeals), the appellant are before the Tribunal.

After hearing both sides, the Tribunal held:

The Notification provides for exemption to be granted to the goods which are leviable to SAD at the time of importation of goods into India for subsequent sale. It can be seen that the said notification specifically grants exemption by way of refund, on fulfillment of conditions of SAD which are paid on the goods when imported into India. In our considered view, the words "at the time of importation of goods" as indicated in Notification has to be read holistically with the provisions of Section 30 of SEZ Act, which also talks about applicability and leviability of such SAD when goods imported. It would mean that when the goods move from SEZ to DTA, the leviability of SAD is on the goods arises, as such movement is considered as "when imported to India". In our view, benefit of Notification No.102/2007-Cus. cannot be denied to the appellants, for the reason that when goods move from SEZ to DTA, leviability of SAD is not in doubt, calculation of SAD is not in doubt and subsequent sale of goods is also not in doubt. The entire provisions relating to refund under Notification No.102/2007-Cus, would indicate that the Government of India had an intention to refund the amount of SAD paid by any importer, even if the goods are procured from SEZ, subject to conditions in the notification. In our view, the appellants have properly demonstrated before us that they have fulfilled the conditions of Notification No.102/2007-Cus.

(See 2013-TIOL-874-CESTAT-AHM)